Asia Business Channel

Chinese economist Li Daokui says that Beijing could limit American access to medicines

Economist Li Daokui said that if the U.S. tries to “starve” China of semiconductors that Beijing could limit American access to medicines.


Key Insights:
• Chinese economist Li Daokui says Beijing could restrict drug exports to the US if the Trump administration was to cut China’s access to semiconductors.

• Washington has been ratcheting up attacks on Chinese tech firms, including starving Huawei of components made by American companies and Li says China would be within its rights to also withhold medicines and other components the west needs.

Chinese academic and government adviser, Li Daokui, says that as supply chain security emerges as a key theme in the upcoming American presidential election that China should weaponize its exports of drug precursors, medicines and other pharmaceutical items if the US cuts China’s access to computer chips or other electronic components that the country’s industry needs.

The United States is heavily reliant on imported medicines from China as well as other medical goods, and both U.S. President Donald Trump and Democratic Presidential-nominee Joe Biden have vowed to address this after the coronavirus pandemic exposed the Trump administrations incompetence and vulnerabilities in its ability to address the country’s pharmaceutical and medical device supply needs.

As Trump continues to deflect the issues of his administrations incompetence in containing and managing the Covid-19 pandemic in the U.S., which has resulted in more than 180,000 deaths (at the time of this writing), both he and Democratic Presidential-nominee Biden have said that they will shift production of critical medical products back to the U.S., loosening reliance on foreign manufacturers like China and creating jobs.

The Chinese government has not yet used medicines and pharmaceuticals to put pressure on the US, but economist Li Daokui said China could limit American access to medicines if the U.S. continues to starve it of semiconductors.

Li said that, “For vitamins and antibiotics, more than 90% of their raw materials are produced in China. The US will definitely not be able to produce them in the short term. Of course, we will not take the lead in doing this, but if the US dares to play dirty, we have these countermeasures.”

In a further attack against Chinese telecommunications company Huawei by the Trump administration, the US Department of Commerce placed further curbs on the company in late-August by adding another 38 Huawei affiliates across 21 countries to the U.S.s “entity list”, which restricts the sale of key US technology to designated Chinese companies.

The latest action by the Trump administration continues its efforts to paint a negative view of China by calling the Covid-19 pandemic the “China Flu” and by taking actions against Chinese companies that include limiting their access to American hardware, software and tech products, and by banning the use of Chinese apps in the U.S. market.

The Trump administration seems to be making a political calculation that escalating a tech war with China, that could include the “decoupling of Chinese and U.S. business interests is in the best interests of the U.S., no matter what the price to U.S. companies and consumers.

Li Daokui, is a professor of finance at Beijing’s Tsinghua University, said the U.S. would continue to “suppress” China’s access to technology by strengthening sanctions against firms like Huawei.

But completely cutting it off from chip supplies would be the “nuclear option”.

“Disrupting the Chinese economy is equivalent to picking a fight with the Chinese people on the food issue. China can then pick a fight with the US on the supply of medicines, right?” he said.

He also stated that China should also be prepared for the “very realistic” risk that the US may cut Chinese banks’ access to the SWIFT international messaging system, the primary network that underpins international transactions.

He said that Chinese banks are developing contingency plans in case they are prevented from using the system, and that cutting Chinese banks from the SWIFT system would be “economic terrorism.”

Li is also a former member of the central bank’s monetary policy advisory committee and said that if the U.S. attempts to limit China’s access to the global financial markets that “We are open to negotiations, but if you are unreasonable, we will fight you to the end at any cost.”

In a recent media interview, President Trump said that the U.S. would decouple from China if “they don’t treat us right” and his re-election campaign has made “ending our reliance on China” a key part of its platform.

Many Asia and Chinese analysts point out that the Trump administration is playing a “no-win” game, and that if he were to win re-election he will not be able to repair damages to the China-U.S relationship and that a decoupling with China would continue.




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